UniSuper’s CIO has flagged the potential for a 10 per cent or greater market correction, but stated the fund will seize it as a buying opportunity.
UniSuper’s Balanced option returned 11.7 per cent in the 12 months to 31 December 2024, while its Sustainable Balanced option returned 15.2 per cent over the same period.
The fund said its investment options with higher exposure to growth assets performed best in 2024, driven by global markets, listed assets, and big tech.
In an investment update, chief investment officer John Pearce said that for an optimal diversified strategy, super funds should be overweight in growth assets over defensive ones, with US tech being the standout sector last year. He also said that listed assets outperformed unlisted assets in 2024, citing the weak performance of direct property as a key example.
“With that as a background, it should come as no surprise that our two best-performing options were Global Companies in Asia and our International Shares option, both recording returns of well in excess of 20 per cent. So, a terrific year for both those options,” Pearce said.
Discussing current market influences, Pearce pointed to the emergence of DeepSeek and its market impact.
“As a matter of fact, about $1 trillion was wiped off the US market in a single day. About $600 billion of that was Nvidia. Put that in context, $600 billion – think about the combined value of all of our major banks. It was more than that,” the CIO said.
“As it turns out, we’re almost back to where were before that big announcement. The big tech companies have all reconfirmed that they are going to spend, in aggregate, hundreds of billions of dollars and continue to develop their AI models. So, the party’s still going on.”
Looking at the long term, Pearce said that if competitors lower tech prices, it could substantially boost productivity, but added that this “game” is still in its early, rapidly evolving stages.
Expanding on other key market drivers, Pearce mentioned Donald Trump’s aggressive policy agenda, but said that the market is only focusing on certain aspects of it.
“One thing the market is taking very seriously is Trump’s attitude to tariffs, and Trump is on record as saying the most beautiful word in the English dictionary is tariffs,” he said.
“The other saying, of course, is that to anyone with a hammer in his hand, every problem looks like a nail. Trump’s hammer is the tariff, and he’s indeed weaponising it.”
According to Pearce, there are two ways this could unfold – the first being that the President’s announcements are just a negotiating tool, in which case “everything should be fine”. On the contrary, a full-scale trade war could emerge, he said.
“You might recall in 2018, when Trump indeed started a trade war with China, markets sold off about 20 per cent. Let’s hope there’s going to be enough adults in the room to prevent a trade war from eventuating,” he said.
2025 could be ‘flat’
Looking ahead to 2025, Pearce said that following strong S&P 500 performance in 2023 and 2024, history shows it’s rare to see three consecutive years of returns exceeding 20 per cent.
With recent history suggesting this only happened once in the ’90s, the CIO said “odds are that we are going to have a flat year” this year.
He flagged the possibility of a 10 per cent or greater market correction, but said he remains confident in the long-term outlook.
“That’s only one year, and we invest over the long term. And over the long term, I’m pretty confident about the state of the global economy. Inflation is behaving itself. Employment remains strong. The tech revolution continues,” Pearce said.
“So indeed, if we do get that correction, UniSuper will be using it as a buying opportunity. We’ve got plenty of cash, and we intend to load up on assets when the price is right.”
